Markets slide as panic hits fever pitch

G’day all!

Well, this has been a great example of what can happen within a week…

Suddenly now, with the AUD/USD on a slide, Billions being wiped of share markets and Superfunds (unless you have a Self-managed and invest in Real Estate!), countries in lockdown, and even sporting events being cancelled or playing at empty stadiums, I guess we all are asking, what’s next?

I certainly am not trying to play down the Virus outbreak, and the effect this will have on thousands possibly tens of thousands of lives, but I also would like to play the role of common sense a little here…

Our biggest threat is actually our response to what is happening.  If panic sets in, then we can begin to see the fabric of our societies start to unravel, even a little (fights in supermarkets over toilet paper…seriously?!)

Just looking at a couple of issues that directly affect us as investors, particularly US investors, we are watching closely the response the economic leaders are making to try and help insure our global economies do not collapse – China and the US particularly as two of the world’s largest economies.

And this is a real fear – universities and schools are closing; tourism (equates for almost 10% of global GDP) is at a standstill; factories (particularly in China) are closed, therefore no products to sell; ships and planes are almost empty; and soon, business will need to begin laying off staff or closing as well, forcing unemployment up. 

There is no point trying to sugar coat this, the impact of this will be felt globally for some time.

The question really is, what can governments and central banks actually do to reduce the impact of this?  I don’t know the answers here, but I do believe, that rate cuts are useless (nobody cares if rates are 2.5%, 1% or 0%) and stimulus packages are not going to have the same effect as they did during the GFC.

In GFC times, borders were not being close, tourism was not stopping, and trade was still occurring around the world, albeit at a slower level…

The slide in the AUD this past week, I feel has been coming for some time, certainly not this quickly mind you.  I was predicting back last year that we would hit the 0.60c range again and feel to be honest, that is about where the Aussie dollar needs to be in the global economy.  We have had it too strong for too long.

What is the impact then, on investing in US property?

Great question…

If you are already invested, then there are certainly a couple of pieces of good news here. 

One, your profits are getting better, every drop of 1% in the AUD/USD rate is an equivalent increase in profits.

Two, with the slowdown in the economy, I have already been able to pick up some great deals I probably would not have been able to get 2 months ago, properties for tens of thousands less than list prices.

On the other hand, if you are still looking to get into the market, then you certainly haven’t ‘missed the boat’ as it were…

Although it is 4-5% more expensive to purchase properties, I personally have been able to negotiate more that this off the list prices at the moment, with sellers starting to worry they will not be able to sell.

Furthermore, it means that profits then made in the US, when brought back into Oz to buy you that new Merc, are equivalently higher based on the exchange rate.

I guess the moral of the story here, is certainly don’t panic, and as for when is the best time to invest in real estate, even in the US… I would always say – NOW!

Don’t forget, we have great FX partners if you wish to discuss the dollar level or looking to send funds, best to talk to the experts, again, it is in times of volatility that there can be great opportunity

You got this!

Happy Investing all and have a great weekend!!